THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

(BEGIN VIDEOTAPE) PAULA ZAHN, CNN ANCHOR: The death of an American hostage beheaded by his al Qaeda captors just hours after a wife's tearful plea.

UNIDENTIFIED FEMALE: Please, I want to see him come back to see me.

ZAHN: Tonight, terror claims another American victim.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: America will not be intimitated by these kinds of extremist thugs.

ZAHN: Is Saudi Arabia the new front on the war on terror.

(END VIDEOTAPE)

ZAHN: Good evening. Welcome. Thanks so much for joining us tonight. The worst has been realized today, al Qaeda militants in Saudi Arabia beheaded their American hostage, Paul Johnson, Jr., who was seized last weekend.

Confirmation first came through graphic pictures of Johnson's body posted on an Islamist Web site. His remains were later found in the Saudi capital of Riyadh. The leader of the al Qaeda cell behind the murder and kidnapping was also killed today, gunned down in a battle with Saudi security forces. But for one family, the terrorist death comes too late.

(BEGIN VIDEOTAPE)

ZAHN (voice-over): For seven days, Paul Johnson Jr.'s family begged for his life. His wife today.

THANOM JOHNSON, PAUL JOHNSON'S WIFE: Please, I want to see him come back and see me. He not do anything wrong.

ZAHN: His son on Wednesday.

PAUL JOHNSON III, PAUL JOHNSON'S SON: I want to say I know that the group of men that got my father, you guy are probably fathers. And just please let him come home and be a grandfather.

ZAHN: But their prayers were ignored as terrorists made good on their threat to kill Paul Johnson, Jr. if the Saudi government they didn't release al Qaeda prisoners. Despite searches by Saudi forces to locate Johnson, the engineer became the third American known to be beheaded by terrorists since the war on terror began.

"Wall Street Journal" reporter Daniel Pearl was the first victim in February of 2002 after kidnapped and held for 29 days by Pakistani militants and just one month ago, 26-year-old hostage Nick Berg was beheaded in Iraq, apparently by an al Qaeda linked terrorist Abu Musab al Zarqawi. His killer, broadcasting tapes of his final moments on the Internet.

As with Berg and Pearl, the barbaric killing of Paul Johnson Jr. has sparked immediate outrage.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: They're trying to intimidate America. They're trying to shake our will. They're trying to get us to retreat from the world. America will not retreat. America will not be intimidated by these kinds of extremist thugs. May God bless Paul Johnson.

ADEL AL-JUBEIR, SAUDI EMBASSY SPOKESMAN: This is an attack against humanity. This is an attack against decency. This is an attack against the innocent.

SEN. JOHN KERRY (D) PRESIDENTIAL CANDIDATE: It's a grotesque act which is a reflection of the challenge of the area at the time.

COLIN POWELL, SECRETARY OF STATE: It's an action of barbarism, an action that shows once again what the world is dealing with.

ZAHN: Lockheed Martin, Johnson's employer, posted a message on its Web site. "Our thoughts and prayers are with the family and friends of Paul M. Johnson, Jr., a family now in grief, a family left to deal with the loss of an innocent loved one."

(END VIDEOTAPE)

ZAHN: Paul Johnson Jr.'s roots were in southern New Jersey and that's where his family has gathered tonight. Deborah Feyerick joins us now from Galloway Township, New Jersey. Good evening Deborah. Has anybody spoken from the family yet publicly?

DEBORAH FEYERICK, GALLOWAY TOWNSHIP, NEW JERSEY: No, not publicly. As a matter of fact, a relative though earlier did tell CNN that the entire family had been devastated by this ordeal. A spokesperson for the family, actually the head of the New Jersey FBI, Joe Billy (ph), did earlier read a statement from the family.

The point that they wanted to make, first, they wanted to thank everyone for their support. They understand that the U.S. and Saudi governments did everything possible. They knew that the odds were not in the favor of the government but they hoped that justice will be served.

The family also saying that Paul Johnson loved the people and the country and that the act was done by extremists, not the people who Paul Johnson liked so dearly -- Paula.

ZAHN: Is the Johnson family at home right now? FEYERICK: No, they're not. As a matter of fact, Paula, they left really just a few moments ago, the family walking out. They were shielded by, I think, police officers, plain clothed officers who held up coats in front of their homes. We did catch a glimpse of Donna Meyeux, Paul Johnson's sister, and she just looked devastated by this ordeal. They were here with Johnson's mother, as well as Johnson's son, his nieces, his grandson, everyone together waiting in seclusion at the home behind me, but once the news came out, the media did come here and then the family left. They were asking everyone to respect their privacy in this horribly tragic time -- Paula.

ZAHN: I hope people will honor that. You did a remarkably raw interview with Paul Johnson, Jr.'s son, where he made that emotional plea that we just saw. And it was your understanding, even up until the very end as they face the cold, hard reality of what could happen, they never gave up hope, did they?

FEYERICK: You know, they really didn't. They were so optimistic. Paul III telling me that in fact they really had hoped that the efforts of the Saudi government, the efforts of the U.S. government would all combine for the most positive outcome, but I spoke to a hostage negotiator earlier today and the negotiator said to me that the 72-hour deadline, the demands that were so extraordinary, it was clear from the very beginning that these kidnappers had no intention of ever releasing Paul Johnson alive.

ZAHN: What do you know at this hour about any arrangements, about possibly bringing the body home to the family.

FEYERICK: Well, the body was found, first of all, in a northern part, a remote part of the capital Riyadh. We are told that it was found shortly after the three chilling pictures were found on the Web site. We are now being told that the body will be flown to Dover Air Force Base. It will undergo forensics, that is, an autopsy. Clearly, the most interesting thing that the authorities want to know is exactly when Paul Johnson was killed. Was he killed today, the day of the deadline or was he killed much earlier, perhaps right after that video was made -- Paula.

ZAHN: Deborah Feyerick, thanks so much for the update.

We have much more tonight on the brutal murder of Paul Johnson, Jr. Next, we'll look at what is known about Abdel Aziz al-Muqrin, the al Qaeda leader believed to be behind Johnson's murder.

(COMMERCIAL BREAK)

ZAHN: The killers of American hostage Paul Johnson, Jr. made their point in the most brutal way, by beheading him. Joining us now on the telephone is a journalist who has been or actually seen the tape of the killing. Omar el-Zebedi is al-Arabiya's correspondent in Riyadh. Thanks so much for being with us tonight, sir.

OMAR EL-ZEBEDI, AL-ARABIYA: Thanks much.

ZAHN: What have you learned about the brutal murder of Paul Johnson, Jr. by seeing this tape?

EL-ZEBEDI: Actually, the Saudi government, they killed 4 of the killers and they captured one of them. Those are the most important leaders and they are very, very dangerous wanted in Saudi Arabia. And one of them, he's a leader of the al Qaeda troops inside Saudi Arabia.

ZAHN: So the sources you have talked to believe this will make a significant dent in the ability of al Qaeda to carry out future attacks against Americans there?

EL-ZEBEDI: That's what we believe. Actually al Qaeda, this kind of organization, they change the leaders if any one of the leaders killed they could change it very quickly. It's easy for them.

But we feel in the last few months, the operations become less organized and we feel now how they start to kill the people without -- without big operation, complicated operation. That's -- that showed they -- they -- this kind of operation don't need a lot of money, don't need a lot of organization. No need for a complicated plan.

So we feel -- we start feeling that al Qaeda, how they work in Saudi Arabia, they can't big operations against compounds and against groups. They start to work against American, foreigns, operation by operation, small operations like hunting, kind of hunting.

ZAHN: Mr. El-Zebedi, if you would, I want to move on to the propaganda value of the videotape you saw showing Mr. Johnson being beheaded. We know that in the past, those kind of tapes have been used as recruiting tools. How much air time will Mr. Johnson's murder get in the Arab world?

EL-ZEBEDI: We believe -- look. How this man killed is innocent. He did nothing. What they did is a murder. But the results is very important. Today, we have actually the Saudi government, the Saudi security, they fail to stop this operation. They can't. They tried for the last few days. They did more than 30 operation. They tried to stop this, but the guy is killed.

The result could be exist (ph) and we accept it. So -- and this will be a very huge field for the security in Saudi Arabia, but the results today, it's changed all the way, because the leaders who kill today, they are very important leaders. They're real important and real dangerous. Abdel Aziz al-Muqrin, he is not just a leader, as someone take care about planning, he's a trainer for the new generation of al Qaeda in the Saudi Arabia. If you take it from this side, you understand we stop one of the most dangerous terrorism in Saudi Arabia.

ZAHN: Let's come back to the tape for a moment.

EL-ZEBEDI: We did a very good job, the Saudi government, they did a very good job.

ZAHN: The American government is giving them credit as well for that. But come back to the graphicness of this videotape. You saw it. Is there any other way to describe it than just awfully brutal, barbaric?

EL-ZEBEDI: It's very bad. What's in the tape, it's very -- it's very bad. It's real barbarian, as the president of the United States he said, it's barbarian. If you watch the tape, I believe you can't eat for a few days. It's very -- it could hurt anyone. If he -- most -- I'm sorry. I can't explain this. It's very bad. What's in the tape is something you can't imagine you could see it in your eyes.

ZAHN: So far, Mr. El-Zebedi, the American networks have decided not to show the video, yet, in the Arab world, it is being shown. Why do you think it's getting so much play?

EL-ZEBEDI: Actually, the Arab country, they don't -- they don't feel that -- they don't happy about what's happened, but the freedom and the understanding of the media, it's little bit different between culture and culture. In the Arab world, the media still need more of the lows (ph). There is no kind of flow to protect the person and privacy and this kind of thing. But the message the people tried -- actually like Arabiya, our channel, they don't bring the picture as it is. They try to make it not clear.

ZAHN: Mercifully so.

EL-ZEBEDI: I believe the pictures will hurt anyone who see it because it's very far away from the human could understand or accept.

ZAHN: Mr. El-Zebedi...

EL-ZEBEDI: But they need it as part of the campaign against those people. Today, we found the people, the normal people in the street, they work, they are very happy. They shake hands with the police and they laugh. They are very happy to kill those people.

ZAHN: All right. We're going to have to leave it there. Omar el-Zebedi, thank you so much for joining us tonight. We appreciate your insights and as we mentioned, the al Qaeda leader believed to be behind Paul Johnson Jr.'s murder was killed today by Saudi security forces. Abdel Aziz al-Muqrin was commander of al Qaeda in the Arab peninsula and sources are telling CNN that Saudi forces also killed, as we just talked about, three other terror suspects.

A short while ago, I spoke with senior international correspondent Nic Robertson in London about al Muqrin and his terror cell. Nic Robertson joins us now from London with the very latest. Good evening, Nic. If you would, tell us what you have learned about what led to the killing of this al Qaeda leader.

NIC ROBERTSON, SR. INTL CORRESPONDENT: It's still not clear what led the Saudi authorities to Abdel Aziz al Muqrin. It certainly was a big operation. It had been going on for a period of time. It did take place shortly after the announcement of Paul Johnson's death. Were the two events linked? That's not clear, but the Saudi security forces operation involved helicopters. It involved chasing not only al Muqrin down, but also three of his very close and top associates in that al Qaeda cell. It involved chasing them down. They died in a shootout. It is being described by Saudi intelligence sources as a very big blow against al Qaeda operations in Saudi Arabia though.

ZAHN: So, Nic, was there ever any doubt on the part of the Iraqi security forces that al Muqrin would follow through with his threat to kill Paul Johnson?

ROBERTSON: No, from the Saudi sources that we were talking to, there was never any doubt that he was going to be killed by al Muqrin. That is what al Muqrin had stated and he had a track record of doing this. He'd videotape brutal executions when fighting in Algeria. Those tapes have been broadcast before. Not only that, the sources we were talking to were saying that after the videotape of Paul Johnson when he was kidnapped, they believed that perhaps al Muqrin and his group didn't even wait those 72 hours, that he was killed very soon after that.

Obviously, forensic analysis of Paul Johnson's body will provide more information on that and Saudi authorities are looking now, perhaps they're going to be able to get more information from al Muqrin's body, perhaps be able to find out where he was living, more information from their typical, that would be typical of what intelligence groups do when they make -- when they make killings like this, when they make capturings like this, that they will provide them a springboard to get more information.

ZAHN: And Nic, you were saying your sources tell you this is a big blow to al Qaeda in Saudi Arabia. What else can you tell us about what al Muqrin is tied to or has been tied to?

ROBERTSON: Well, we know, we believe from our sources that he received a lot of his training in Afghanistan, that he went to Algeria, fought with Islamic groups in Algeria, Bosnia, Somalia. He went to Ethiopia. When he was in Ethiopia, he was arrested, deported to Saudi Arabia where he was given a four-year jail sentence but in jail he appeared to change character, learned the Koran by heart and within two years had convinced not only the Saudi authorities, but his own family that he had essentially renounced violence and was going to lead a quiet life. So he was released at the beginning of 2003, though apparently he began to group together with other people who had fought with him in Afghanistan and some of those other countries. They believe that it was all leading to this point.

ZAHN: Certainly a night of dramatic developments. Thanks so much for the update, Nic Robertson.

Still ahead, the beheading of Paul Johnson, Jr. is only the latest act of terror in Saudi Arabia. Barely three weeks ago, 22 civilians were killed after terrorists raided oil company housing compounds, and we'll look at the history of terror strikes in Saudi Arabia. We'll be right back.

(COMMERCIAL BREAK)

ZAHN: (UNINTELLIGIBLE) American hostages appears to be part of a stepped up campaign by al Qaeda within Saudi Arabia. To a large degree, the targets seem to be the non-Saudi residents who help make the kingdom's oil-based economy work. (BEGIN VIDEOTAPE)

ZAHN (voice-over): The murder of Paul Johnson Jr. is the latest in the wave of terror attacks that have targeted foreigners living and working in Saudi Arabia.

April 21, a suicide bomber in Riyadh kills five and wounds 148.

May 1, gunmen storm the offices of an American company in Yangbu (ph), killing two Americans and four others.

May 29, terrorists on a shooting spree in Khobar attacked two oil company compounds, and then took hostages inside a residential compound. Twenty-two people, including one American, were killed.

June 8, Robert Jacobs, an American working for a U.S. company, shot dead at his home in Riyadh.

June 22, Kenneth Scroggs, an American, also shot dead in Riyadh as he parked his car.

These attacks within just the last two months. Over the past year, terrorist attacks in Saudi Arabia have killed more than 60 people, mostly foreigners.

The attacks have escalated, despite what the Saudi government describes as an aggressive campaign to root our terrorism. But for the Saudis, it's an unconventional war against an enemy that can easily blend into the population.

For the terrorists, these attacks become a win-win situation. Westerners who say become perpetual targets, and if they are scared away, some fear the Saudi economy will suffer, disrupting life and possibly destabilizing Saudi rulers.

(END VIDEOTAPE)

ZAHN: For some insight on this new wave of terror in Saudi Arabia, I'm joined by Ben Venzke in Washington, the CEO of IntelCenter, which specializes in intelligence support on terrorism. He's also the co-author of "The Al Qaeda Threat: An Analytic Guide to al Qaeda's Tactics and Targets." Welcome, Ben.

After months of terrorist attacks, we have seen three dead Americans in the last 10 days. Why the escalation?

BEN VENZKE, FOUNDER & CEO, INTELCENTER: Well, at some point about a year ago exactly, al Qaeda made the determination that it was time for a stepped up campaign against Western targets, and some elements also felt against Saudi security forces. And they have continued despite all of the arrests, all of the killings by Saudi security forces of al Qaeda members. They have kept up this relentless pace, and we can expect it to continue.

ZAHN: I understand that you also believe that al Qaeda is extremely strategic in the way it goes about choosing its victims. Why was Paul Johnson Jr. targeted?

VENZKE: Well, there is extensive discussion within the group and strategies and looking at targeting and what can have the greatest impact in terms of furthering their goals. And with Johnson, you have the military connection, you have a contractor. You also have someone who is a bit more exposed. It fits all of these things. But also, even on a more practical level, they're known to conduct extensive surveillance of different people, and they're going to go after the person that they think they're going to have the greatest chance of success with.

ZAHN: What kind of surveillance were you talking about? How sophisticated is it?

VENZKE: They're going to look for people that have some kind of pattern, some kind of predictability or routine, and not to say this is the case with Johnson, because I don't know, but they're going to want people that drive the same route to work every morning, that leave at the same time, that are generally always at these places, because that allows them to plan, practice and then execute the operation without unexpected changes.

ZAHN: We've heard a lot through this broadcast already tonight how critical it is that the Saudi Arabia security forces have now taken out what they believe is four key members of al Qaeda, including a big, big target. Do you have any faith that this will slow down future attacks on Americans in Saudi Arabia?

VENZKE: I wish I could say it would. I mean, there is no question that the death of al-Muqrin is an incredible success. It's a very good development. But what we have to remember is, the Saudi security forces, this is the third leader of the al Qaeda organization that they've killed in the last 12 months, and it is not by looking back at the history of attacks that you just reviewed, it hasn't done much to impede their ability to continue to execute additional operations.

So while it is a success, the group has inevitably planned for this moment and is going to move ahead with additional attacks.

ZAHN: I think everybody out there who has heard the discussion (ph) of this tape, understands the propaganda value, I guess, of having this horrific video out there, showing Paul Johnson Jr.'s head being cut off. But what is the strategic reason for al Qaeda so dutifully taking these pictures?

VENZKE: Well, as we've seen with some of the other shootings and other attacks, if they simply kill a person, that's it. It gets briefly reported, has a certain level of impact, but it doesn't hit home as much, with the much broader audience, people sitting at home. And when they videotape it, it drives that. It's almost a second attack, if you will. But in addition to that, it also drives morale in the group, it drives recruitment, and fund-raising as well.

ZAHN: Coming up next, an American is kidnapped and beheaded, as we've been talking about. Is Saudi Arabia safe for the thousands of Americans who still live there? We'll be talking about that with the U.S. ambassador to Saudi Arabia when we come back.

(COMMERCIAL BREAK)

ZAHN: Right now, the latest on the story we've been focusing on in this hour. Saudi security sources tell CNN that the al Qaeda figure suspected of masterminding the kidnapping and beheading of American hostage Paul Johnson has been killed in a shootout after a police chase in Riyadh. Besides Abdel Aziz al-Muqrin, the sources say three other al Qaeda suspects were killed.

The decapitated body of 49-year-old Johnson, an engineer for Lockheed Martin, was found just outside of the Saudi capital of Riyadh today. The State Department, meanwhile, has issued a new warning to Americans in the Persian Gulf region, beyond Saudi Arabia. It says extremists may be plotting attacks against Westerners, and workers and to get out.

Are Americans safe in Saudi Arabia? Well, the killing of Paul Johnson may heighten the fears of U.S. citizens currently living there, and earlier I talked on the phone to the U.S. ambassador to Saudi Arabia.

(BEGIN VIDEOTAPE)

ZAHN: And the U.S. ambassador to Saudi Arabia, James Oberwetter, joins us now. Thank you for joining us, sir.

JAMES OBERWETTER, U.S. AMBASSADOR TO SAUDI ARABIA: You're welcome.

ZAHN: I know you all were praying it wouldn't come to this. Your reaction to this horrible news.

OBERWETTER: Well, it is with tremendous sadness on -- on our part that we had to report the news of the death of Paul Johnson. Like many others, we learned about this through the Web site reports. That seems to be typical of how these people are doing business. We're -- all we can say is that there's tremendous sadness on the part of the family here, the U.S. embassy, the American community in Saudi Arabia.

ZAHN: Mr. Ambassador, do you believe the Saudi Arabian government and its security forces did everything they could do to try to save the life of Paul Johnson Jr.?

OBERWETTER: You know, I really do. During these past few days, the Saudi security authorities were intensely focused on Paul's safe return. We want to, frankly, express our gratefulness to them for all they did, because they dropped many other important matters to focus on this case. They received very well America's offer of assistance to them, in the form of U.S. experts well versed in matters like this. Our embassy has an FBI office, and they were fully cooperative with that office and with others who joined in these days trying to find Paul.

ZAHN: But sir, in spite of what you're saying, there are foreign oil workers who are saying quite pointedly that they have no faith in Saudi Arabia's security forces, and the United Press International has actually obtained some copies of e-mail exchanges between Saudi Aramco executives, pointing out the inadequacy of what they say is the (UNINTELLIGIBLE) Saudi force. And let me just read to you one of the quotes directly out of an e-mail. "Aramco and Saudi Arabian forces are completely inadequate in terms of training, capability and motivation."

Sir, do you understand why these American workers in Saudi Arabia feel so vulnerable and have such limited faith in the Saudis?

OBERWETTER: Well, let me start by saying that I haven't seen those e-mails. But I think that given the events of the past several weeks, that American workers in Saudi Arabia do have a right to feel that way. There have been a number of attacks, some resulting in death, others with a number of people wounded, and of course that would add to a high anxiety level.

So far, none of the oil facilities in the Kingdom have been damaged, but a lot of people have either been killed or wounded. So yes, I do understand that.

But turning to the event today, it's very important to focus on the fact that Saudi authorities did everything they could in the three days that they were given to find Paul here in Riyadh. Riyadh is a city of about three million people, just about the size of Chicago. So they really didn't have too much time to work on this case.

ZAHN: Finally tonight, Mr. Ambassador, has the level of threat against American workers in Saudi Arabia reached a stage of crisis?

OBERWETTER: Well, it's reached a point where the U.S. State Department in April urged American citizens -- strongly urged American citizens to depart the Kingdom. I think that pretty well speaks for itself. Americans have worked here for more than 70 years, but until recently -- it's only been recently that they have been targeted. Indeed, many of these things that you see on the Web sites by the terrorists do target Westerners. So it's time for us to be exceedingly cautious. I've just returned from visiting with Mrs. Johnson this evening, who asked -- and expressing -- and of course expressing our concern. She asked that I expressed thanks to all of the Johnson friends around the world, who were thinking of them and praying for them and taking action on their behalf.

ZAHN: What else did she say that you can share with us, Mr. Ambassador?

OBERWETTER: Well, it was a sad occasion. She was surrounded by a number of friends, as well as individuals from the embassy here, and is deeply concerned about the terrorist activities, and just deeply saddened, is all I can say.

ZAHN: And it must have been particularly hard to listen to that after she had made such a heartfelt plea to save her husband's life.

OBERWETTER: I was able to tell her that she did a superb job in trying to help Paul's release. And then I talked to Paul III in New Jersey, expressing sympathy to him, and telling him the same thing. I must say that both of these family members, though, turned right around and expressed their thanks to everybody, not only the people here at the embassy but also the Saudis, for everything they did to try to help, and also to all of their friends around the world.

ZAHN: They've got a lot of strength. Mr. Ambassador, thank you for joining us tonight.

OBERWETTER: Bye-bye.

(END VIDEOTAPE)

ZAHN: Ambassador Oberwetter.

Coming up, was the Saudi fight in the war on terror today too little too late? We'll look at that next.

(COMMERCIAL BREAK)

ZAHN: Saudi Arabia says it is fighting the war on terrorism, but the kidnapping and beheading of Paul Johnson has raised more questions about the country's commitment. Is the government powerless to deal with the terrorist threat, or is it choosing not to do what it should be doing?

Joining us now to discuss this from Dallas, Robert Jordan, a former U.S. ambassador of Saudi Arabia. And joining us from Washington tonight, Congressman Dan Burton of Indiana, a senior member of the House International Relations Committee. Welcome, gentlemen. Good to see both of you.

UNIDENTIFIED MALE: Nice to see you.

ZAHN: Ambassador Jordan, we have heard the Saudis from time to time are not doing enough to fight terror. Today, this is what Senator Charles Schumer had to say, "for too long, the Saudi government has aided and abetted terrorism in too many ways, whether it be not cooperating on terrorist investigations, funding terrorism around the world or benignly accepting extremist beliefs in the name of fundamentalist Islam." Is it time for the U.S. to put more pressure on Saudi Arabia to crack down on terrorism?

ROBERT JORDAN, FMR. AMBASSADOR TO SAUDI ARABIA: Well, Paula, I think that time came long before today. And I think we have put that additional pressure on the Saudis. And quite frankly, I think after the May 12 bombings of last year, the Saudis have stepped up their emphasis on security to a much greater degree and we have seen a much greater degree of cooperation.

ZAHN: Stepped up or is it acceptable?

JORDAN: No, I think they've stepped it up. I don't think even the Saudis would say today in the wake of Paul Johnson's death, that they are accepting of their own performance. They may have tried hard. They say they've had 15,000 of their agents working on this case for the last three days. But I don't think anyone should sit and feel comfortable today with the way this has turned out.

There is a lot more that needs to be done: there is more training, there is more recruiting, there are more intelligence officers who are needed. There is a great deal more work to be done. I do believe the Saudis are sincere in their desire to do a better job. But they have a tremendous uphill battle and it remains to be seen how successful they're going to be.

ZAHN: Representative Burton, do you think the Saudis are sincere? Because if you take a look at public opinion, there seems to be a great deal of cynicism about that. 66 percent of those polled in a Gallup poll said they had an unfavorable opinion of Saudi Arabia and Senator Schumer said the Saudis, quote, "have done more to fund terrorism than any other country."

REP. DAN BURTON (R), HOUSE INTERNATIONAL RELATIONS COMMITTEE: Well, it's rare that I disagree with Chuck Schumer but this is one instance where I do. The Saudis are not our friends. We have an arrangement of convenience. We buy their oil and they get our money. The fact of the matter is the Saudis have been funding terrorism for a long time. They've been funding these madrases (ph) where they teach a Wahabism (ph) which is a hatred of Christians and Jews and other groups in this world and they're starting to reap the whirlwind because those people that they have been training in these madrosis are growing up and they're becoming radical members of Islam and they're joining organizations like al Qaeda. That's the big problem.

The Saudis are reaping the whirlwind of what they've been doing for a long, long time. What we need to do is put extreme pressure on them to deal with these people because I think they're afraid to deal with them the way they should. And if they aren't willing to do that, then we need to do something else about energy and let them pound sand, in my opinion.

ZAHN: What are they afraid of?

BURTON: Well, I think they're afraid of an overthrow of their regime because they've created so many radical fundamentalists over there through these madroses over the years. They've been doing this for years and years and years, they've been giving billions of dollars to terrorist organizations over the years and this is not just something I pulled out of the air, these are facts. As a result I think they're afraid now if they go too far they're liable to be assassinated themselves.

ZAHN: Ambassador Jordan, I want to read to you something that the Council on Foreign Relations has come up along the lines that Mr. Burton just espoused. "Saudi Arabia continues to export radical extremism by spending hundreds of millions of dollars on schools, mosques, and cultural centers around the world. It fosters intolerance directed against the United States, Christians, Jews, and even other Muslims." You represented our government in Saudi Arabia. Why do we tolerate this?

JORDAN: We don't tolerate it, Paula. And I think I was one of the few to raise these issues with the Saudis over the past several years. I think we've made some progress in dealing with the Saudis in this regard, but there is so much more that remains to be done. They will tell us that they have fired or retrained about 2,000 Imams from their mosques, they've changed their textbooks, but this is still not enough. I'm still concerned at the text of the sermons that I'm hearing from their mosques in which Imams are still praying for the destruction of the Jews and the infidels and so I agree with Mr. Burton that there is a tremendous amount of hatred that is still coming out of the Kingdom and this is something of great concern.

I think it has to be distinguished a little bit from government support for terrorist causes and I believe during my tenure and certainly all of the intelligence information that I was privy to, we did not see government support of terrorist activity, particularly al Qaeda, during the time that we were there over the last couple of years but the ideological support for terrorism and the hatred that still is preached from so many of these mosques, I think, is the next frontier that we have got to deal with in a very aggressive way.

ZAHN: Representative Burton, a closing thought on where you think the Saudi royal family finds itself tonight. If you believe that they took on al Qaeda in an aggressive way, does that all but guarantee that the Saudi royal family will be fighting for its right to exist?

BURTON: I think there's Muslim extremists in the military over there and their police department and in the royal family itself. And I don't think there is any love for us whatsoever. I think it's an arrangement of convenience because they want us to buy their oil and we're the richest country in the world. What we have to do is get tough with them and I mean tough. Not talk to them anymore.

ZAHN: What do you mean by tough?

BURTON: That we're going to buy our oil elsewhere and we could buy more oil from Latin America, Mexico and open up the end, a lot of things we could do instead of continue to be dependent on the Middle East and particularly the Saudis for our energy source.

ZAHN: All right.

BURTON: We've been talking about this since the '60s and '70s and we haven't done it and it's time we did.

ZAHN: Gentlemen, we have to leave it there. Thank you both for spending time with us this evening. Appreciate it.

Coming up, the first news of the beheading of Paul Johnson Jr. came on the Internet. We're going to see how terrorists have learned to take advantage of the global and uncensored reach of the web. (COMMERCIAL BREAK)

ZAHN: The first horrific images of the death of Paul Johnson Jr. came on the Internet. It is just one example of how terrorists have adopted the web to get their message directly to people which is crucial to their political goals. Tom Foreman takes us through that part of the story.

(BEGIN VIDEOTAPE)

TOM FOREMAN, CNN CORRESPONDENT (voice-over): Of all the weapons in terrorists' hands, none maybe more effective in touching millions of lives than the Internet. That is where Paul Johnson's kidnappers made their threats and that is where they demonstrated that they had carried them out.

OCTAVIA NASR, SENIOR EDITOR, "ARAB AFFAIRS": Their messages are reaching millions of people around the world within seconds. The media are watching. The world's media are watching them and reporting on what they're saying. So in many, many ways, they have done an outstanding job reaching us and catching our attention.

FOREMAN: Seven years ago, the United States Institute of Peace was monitoring 12 terrorist Web sites. Today, the number is 4,000 and growing!

GABRIEL WEINMANN, UNITED STATES INST. OF PEACE: For propaganda purposes, it's an ideal medium. Nobody is censoring them, nobody is blocking them. There's no way to block them.

FOREMAN: A report by the Institute points out the most easily reached sites are generally about propaganda, but as users delve deeper, they find the sites are used to raise money, recruit followers, and exchange information about tactics and targets. Proof? The Institute says kidnappings and executions on the Internet were first seen in Chechnya, then adopted in the Middle East.

WEINMANN: They can use it not only to train, not only to teach, but also to look for information. What we call dot minding. We can look at the Internet as a huge library and useful for terrorists.

FOREMAN: And Paula, all of this is allowing terrorists to put their most terrifying acts directly into homes and offices all over the world.

ZAHN: Tom Foreman reporting. Thanks. Joining us from now from Washington, Barbara Ferguson, Washington bureau chief of "Arab News" a leading English language daily in the Gulf region. Good of you to drop by. So Barbara, how powerful is the impact of the web in the Arab world? BARBARA FERGUSON, WASHINGTON BUREAU CHIEF, "ARAB NEWS": I think it is very important. I know that, for example, since Mr. Johnson was killed, they immediately came out talking about how he had worked for the Apache helicopters as an engineer and they brought up the fact that it was the Apache helicopters that have been attacking many of the people in Fallujah and also Apache helicopters that are being used in the Gaza Strip and in the West Bank. So there is this analogy and I think that's quite effective for disenchanted youth who are listening to that. It's a way of sort of getting back for the -- revenging the deaths of the Muslim women and men, if you wish.

ZAHN: One of the other things you have spent some time exploring are attitudes in the Arab world in this post 9/11 environment.

FERGUSON: Right.

ZAHN: What kind of a shift have you seen in opinion?

FERGUSON: You know, I tell you, right after 9/11, we had the sympathy and -- of the entire Arab world. They were distraught, they were unhappy, they felt -- they were apologetic and they felt responsible for what had happened because of their closeness to society and they felt very guilty about this. I think the Bush administration had two choices. They chose a very -- the aggressive choice and this has alienated many people in the Arab world and they are unhappy with what they see in Iraq and they also feel that America -- the feeling is that America has sustained the Israelis and there's a lot of resentment on the ground in regards to what is happening to the Palestinians.

ZAHN: Do you think if the turnover works successfully in Iraq, that will change or soften any opinions?

FERGUSON: Of course. Of course. Of course, I think the situation is so desperate right now. They would be so happy to have their country up and running again and who wouldn't like to have a democracy that is actually functional in the Middle East?

ZAHN: Let's talk, again, about the explosive value of this videotape now that just about anybody can dial on to on the web and, at some point, I'm sure we'll see it on American television. What do you think or how do you think it will resonate in the Arab world?

FERGUSON: The tragedy is with the other three Americans that have been killed in this month, it was -- it was instant death, we didn't have the chance to have the emotional impact. We weren't invested in it in the way that we were in regards to Mr. Johnson. But I don't know. I know there are a lot of disenchanted Saudi, young Saudis -- don't forget that half of the Saudi population is under 18, a lot of them are jobless, they're bored, they -- some would say they're sexually frustrated and some would say they've been religiously brainwashed. How this is going to affect them is going to be interesting.

ZAHN: We will be watching from here. Barbara Ferguson, thank you for your time tonight. We're going to take a short break. We'll be right back.

(COMMERCIAL BREAK)

ZAHN: And that wraps it up for all of us here. Thanks so much for being with us tonight. On Monday we take on the Bill Clinton blitz as the former president moves to centerstage again with his new over 900-page memoir. Thanks for joining us tonight. Have a great weekend. "LARRY KING LIVE" is next.

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